LAST week's proposal by Goldman Sachs and private equity groups Apax and Blackstone to take control of ITV would involve refinancing fees of 290m and the reduction of the broadcaster's programming budget by 25%.
The proposal would see some 362m ripped out of the 1.4bn annual programming budget for the ITV family of channels, in turn affecting UTV. That would mean more repeats and more bought-in American programmes such as Friends and The West Wing.
ITV has often trumpeted its investment in making original 'quality' drama, but viewing figures for its main ITV1 channel are in sharp decline. It is understood the bidders, who want a 48% stake, will commit to investing only for a year. The plan involves the Goldman consortium injecting £1.3bn ( 1.8bn) in equity and returning 86p a share to existing shareholders.
The bidders would axe ITV chief executive Charles Allen, and most of the top management. The BBC's former director-general, Greg Dyke, would run the new company.
Allen has arranged urgent meetings with shareholders next week to discuss the approach, which the company has rejected.
The Goldman consortium believes ITV spends more on content than its European peers, but the audience payback decreases every year - making it an inefficient use of money.
The consortium has indicated that it would explore adding pay-TV services to ITV's freeto-air business model. Analysts suggested they may sell off ITV's large production business, which would fetch about 1.7bn.
The bidders feel they are offering a deal structure that institutional shareholders are clamouring for - some cash up front with a share in the continuing upside. At least two institutions - Fidelity, ITV's biggest shareholder, and SVG Capital - support the approach. The Goldman consortium believes many shareholders are unhappy with ITV, which has lost out in the London stock market rally over the past two years, but a fullblown cash offer for the company could not work financially for a private-equity bidder.
|